<PAGE> 1
1996 ANNUAL REPORT
[RISER FOODS LOGO]
Building for the future... Riser Foods has the right ingredients for success.
<PAGE> 2
Our Mission
Riser Foods is committed to excellence as a food retailer, wholesaler,
and ice cream manufacturer. We strive to attract and develop outstanding people
who are committed to exceeding our customers' expectations in an environment of
teamwork and mutual respect. Our dedication to superior customer service,
quality, and value will result in a high level of customer satisfaction as well
as a reasonable return to our shareholders.
Riser Foods will be a leader and an innovator in the industry,
recognizing the need to maintain growth and profitability. We aspire to the
highest ethical standards of service and professionalism in all our operations.
CONTENTS
Financial Highlights 1
Letter to Stockholders 2
Our Recipe for Success 4
At A Glance 8
Management Discussion
and Analysis of Financial
Condition and Results
of Operations 9
Financial Statements 15
Directors and
Executive Officers 27
Other Stockholder
Information 28
<PAGE> 3
Financial Highlights
<TABLE>
<CAPTION>
(Dollars in Millions, Except Per Share Data & Key (52 WEEKS) (52 weeks) (52 weeks) (53 weeks) (52 weeks)
Statistics) 1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------
OPERATIONS
Net sales $ 1,285.2 $ 1,185.0 $ 1,121.6 $ 1,108.2 $ 979.3
Net income before extraordinary item and
cumulative effect of change in accounting
principle 16.6 11.6 1.5 6.2 8.1
Extraordinary item: Utilization of net operating
loss carryforwards -- -- -- .3 --
Net income before cumulative effect of change in
accounting principle 16.6 11.6 1.5 6.5 8.1
Cumulative effect of change in accounting
principle: Accounting for income taxes -- -- 6.9 -- --
Net income 16.6 11.6 8.4 6.5 8.1
Per share data:
Net income from continuing operations 2.05 1.42 .18 .75 .99
Extraordinary item -- -- -- .03 --
Cumulative effect of change in accounting
principle -- -- .85 -- --
---------- ---------- ---------- ---------- ----------
Net income $ 2.05 $ 1.42 $ 1.03 $ .78 $ .99
---------- ---------- ---------- ---------- ----------
Common stock dividends .20 -- -- -- --
---------- ---------- ---------- ---------- ----------
FINANCIAL POSITION
Working capital $ 15.0 $ 23.9 $ 43.0 $ 24.3 $ 24.2
Property, equipment & capital leases, net 124.0 118.1 108.5 101.1 91.0
Total assets 262.3 268.5 257.5 233.4 204.8
Long-term obligations:
Debt 32.5 55.7 75.5 56.3 51.9
Capital leases 5.5 6.8 8.2 10.6 10.7
Liabilities to equity ratio 1.9 2.6 3.0 3.1 3.1
Stockholders' equity 89.9 74.4 64.7 56.4 50.1
Book value per common share $ 11.11 $ 9.20 $ 7.78 $ 6.75 $ 5.97
---------- ---------- ---------- ---------- ----------
KEY STATISTICS
Number of stores-end of year 37 38 42 45 51
Weighted average number of stores 38 40 44 48 51
Total store square footage 1,775,800 1,817,000 1,905,600 1,809,800 2,117,600
Average core store size 47,995 47,617 46,853 41,938 40,715
---------- ---------- ---------- ---------- ----------
</TABLE>
1
<PAGE> 4
Dear Fellow Stockholders
Fiscal 1996 was a GRATIFYING year for all of us at Riser Foods. For the
past eight years, we have worked hard, building a foundation to support and
promote our long-term growth and profitability. Today, we are reaping the fruits
of our labor. We also understand that our work is not done; as we grow and
evolve as a company, so too do our plans and aspirations for the future.
We began fiscal 1996 faced with an exciting challenge: to surpass our
record fiscal 1995 financial results. With a focused strategy and the commitment
of over 5,400 Riser associates, we ACCOMPLISHED our goal. Net sales rose 8.5
percent to a new high of $1.285 billion. Net income also set a new company
record, increasing an impressive 42.7 percent to $16.6 million, or $2.05 per
share. We further solidified our balance sheet with the reduction of long-term
debt to $38.0 million and the GROWTH of stockholders' equity to $89.9 million.
We look forward to achieving another milestone in fiscal 1997: $100 million of
stockholders' equity.
Sales in our company-operated retail stores recorded a strong
performance in fiscal 1996, with net sales up 5.3 percent and same-store sales
growth of 7.3 percent. Committed to serving our customers more effectively and
improving the overall shopping experience in our Rini-Rego Stop-N-Shop
supermarkets, we continue to move forward with our store remodeling and
expansion program. In the past four years, we have renovated or replaced 19 of
our 37 stores, increasing the average size of each store from approximately
38,000 to 48,000 square feet. Fiscal 1997 will be our most aggressive year to
date for this program, with the number of newly renovated or replacement stores
in our portfolio climbing to 25 by fiscal year-end. As we complete the
REMODELING AND EXPANSION of our existing store base over the next couple of
years, we will also become more aggressive in our search for new sites and
opportunities to promote the growth of our retail stores.
Sales to independently-operated retail stores also had an excellent year,
posting net sales growth of 11.9 percent. We continue to build these sales
through planned geographic expansion into new markets and increased penetration
of existing accounts. Aggressive business DEVELOPMENT efforts during fiscal 1996
led to the addition of several new customers, including the 102 store Phar-Mor
discount drugstore chain. Those development efforts also spurred our growth in
areas we targeted for expansion, specifically southeastern Michigan, western
Pennsylvania, and West Virginia. To support our growth, we recently began an $8
million expansion project at our Bedford Heights distribution facility to
increase its capacity by approximately 20 percent. Construction is scheduled for
completion by the end of fiscal 1997.
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Our success during fiscal 1996 was the result of the combined efforts
of everyone at Riser Foods. We believe our associates' enthusiasm and commitment
to meeting our customers' requirements are unrivaled in the industry. We
encourage a strong work ethic and believe in giving our associates the skills
necessary to make good business decisions. Since fiscal 1994, we have INVESTED
more than $3.0 million to train our entire work force in the principles of Total
Quality Management. Searching for ways to reduce costs and improve customer
service has become a way of life at Riser, and our performance reflects it. Our
objective for fiscal 1996 was to INCREASE our after-tax productivity by 1/10 of
one percent. We did three times better than that, improving our net margin to a
record 1.29 percent of sales. We have no intention of resting on our laurels and
expect to make further productivity improvements during fiscal 1997.
On September 10, 1996, we were pleased to announce the Board of
Directors' decision to increase the quarterly cash dividend on all classes of
the company's common stock by 20 percent to $0.06 per share. This action
reflects the Board's CONFIDENCE in the long-term outlook for Riser Foods and
underscores its commitment to build the value of your investment in our company.
We are also pleased to welcome Jack A. Robinson as the newest member of
our Board of Directors. Mr. Robinson was the founder, chairman, and chief
executive officer of Perry Drug Stores which, prior to its acquisition, was the
largest retail drugstore chain in Michigan, with annual sales of $750 million.
Mr. Robinson brings to us a wealth of KNOWLEDGE and experience, and we look
forward to his contributions.
As we look ahead to fiscal 1997 and beyond, there is a great sense of
excitement and optimism at Riser Foods. We remain COMMITTED to the long-term
goals we established two years ago: to grow sales at an annual rate of five
percent and to increase profitability by controlling operating expenses and
improving productivity. We believe these combined efforts will generate
double-digit increases in earnings per share. With a vision for the future and a
sound business plan designed to make that vision a reality, we are ready to lead
this company into the twenty-first century.
Yours truly,
/s/ Anthony C. Rego /s/ Charles A. Rini, Sr.
Anthony C. Rego Charles A. Rini, Sr.
Chairman and Chief Executive Officer President and Chief Operating Officer
3
<PAGE> 6
In less than a decade, Riser Foods has emerged as one of the leading regional
food distributors in the country. Our recipe for success is simple: we focus on
consistently meeting our customers' requirements for high-quality merchandise
and superior customer service.
1. OUR RECIPE STARTS WITH GOOD PEOPLE...
Building a successful organization, like preparing a gourmet meal, starts with
the right ingredients. At Riser, the first and most important ingredient in our
recipe for success is our people. Over the past several years, we have
strengthened our management team with individuals who have brought a wealth of
knowledge and experience to this organization without diluting its
entrepreneurial spirit. We are investing heavily in the training and development
of all our associates because we understand the value they bring to this
organization every day. Their commitment to proudly service our customers sets
us apart from the competition and keeps our customers coming back.
2. COMBINE WITH A FOCUSED STRATEGY AND A COMMITMENT TO INVESTMENT IN
THE FUTURE...
In addition to good people, the key ingredients in our recipe for success
include a focused strategy for growth and investment. In the past five years, we
have invested $138 million to support and promote the growth of our retail,
wholesale, and manufacturing operations.
As retailers, our goal is to provide our customers with a consistent and
enjoyable shopping experience. Since fiscal 1989, we have reduced the number of
retail stores we operate from 52 to 37. At the same time, we have increased the
average size of each company-operated store from approximately 38,000 to 48,000
square feet. Our new larger stores are designed to meet customers' traditional
grocery needs while offering an expanded array of products and services. Both
our Marketplace stores and our newly renovated Neighborhood stores, which are
smaller in scale, feature large service departments and provide one-stop
shopping conveniences, such as prepared foods-to-go, one-hour photo processing,
greeting cards, books, magazines, and full-service in-store bank branches. These
formats are excellent vehicles for aggressively confronting the competition,
particularly from non-traditional sources, such as wholesale clubs, convenience
stores, and restaurants.
Developing new customers in contiguous markets along with expanding the
range of our product offerings are the primary strategies used to promote the
growth of our wholesale operations. In fiscal 1996, we added the Phar-Mor
(continued on page 7)
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[PAGE INCLUDES PICTURES AND GRAPHS WHICH ARE NOT INCLUDED IN THE EDGAR VERSION.]
PEOPLE
Our associates are our most valuable asset. Their hard work and commitment to
consistently meet our customers' requirements have helped to build this company
and will continue to contribute to our success.
STRATEGY
With a strategy designed to support and promote our long-term growth and
profitability, we reported record financial results in fiscal 1996.
INVESTMENT
One of the hallmarks of our success is our capital investment program. Since
fiscal 1992, we have invested $138 million to improve and expand our operations.
Over the next three years, we will invest approximately $100 million more.
QUALITY
The freshest bakery, the highest quality meats and produce, and seafood as good
as that served in the finest restaurants--we select merchandise for our
customers as if we were shopping for our own families.
5
<PAGE> 8
[PAGE INCLUDES PICTURES AND GRAPHS WHICH ARE NOT INCLUDED IN THE EDGAR VERSION.]
TECHNOLOGY
Investments in leading-edge technology are an important part of our plan to
improve the efficiency of our operations and promote our continued growth.
VARIETY
Variety is the spice of life, and we pride ourselves in carrying an assortment
of products broad enough to satisfy even the most discriminating customer.
CONVENIENCE
Keeping pace in today's hectic world is not easy which is why we make it
convenient to do business with us by offering a wide array of products and
services to meet our busy customers' changing requirements.
6
<PAGE> 9
chain of deep discount drugstores to our impressive customer list. We also
expanded our presence in other markets. After initially entering the Detroit
area in early fiscal 1995, we now ship groceries to a number of supermarket
chains in southeast Michigan. In western Pennsylvania, also a relatively new
market for us, we picked up several new customers during the year. Efforts to
build our customer base further continue in both markets.
To support our growth, as well as improve the efficiency and effectiveness
of our wholesale business, we are investing more than $8 million in our
distribution facilities to increase capacity by approximately 20 percent.
Upgrading our computer systems is another key component of our strategy.
Accurate and timely inventory information enables us to control purchasing and
manage reorder activities, thereby minimizing the time and cost involved in
delivering products to our customers.
In fiscal 1996, our Eagle Ice Cream operations produced more than 3.1
million gallons of private-label ice cream for our stores, other retail grocery
chains, and a national institutional food distributor. Although a relatively
small division compared with our retail and wholesale operations, we are
actively pursuing opportunities to build this business and expand the
distribution of our ice cream and frozen novelty products.
3. FINALLY, MIX THE TOOLS OF TOTAL QUALITY MANAGEMENT WITH TECHNOLOGY, VARIETY,
AND CONVENIENCE.
Our recipe for success would not be complete without the principles of Total
Quality Management. Since we initiated this process in 1994, we have
consistently enhanced the efficiency of our organization and improved the
level of service in our Rini-Rego stores and in our Seaway and Eagle
distribution centers. Looking for opportunities to reduce costs and improve
customer service has become a way of life at Riser Foods and will drive future
productivity gains.
Remaining on the forefront of technology is also important to our success.
Advances, such as in-store computers, labor scheduling, and pricing
verifications and updates and debit and credit card transactions--allow us to
better service our customers while improving our operating efficiency. Point of
Sale technology made it possible for us to launch our Preferred Shoppers Club, a
program which rewards over 600,000 club members with "bonus buy" automatic
discounts, "clipless coupons" and other "preferred" promotions. It also helps us
develop a better understanding of customer purchasing patterns and use this
information to formulate stronger and more effective merchandising programs
which ultimately build sales.
Variety and convenience are the final two ingredients in our recipe for
success, and they go hand-in-hand. To address the one-stop shopping needs of
today's busy consumer, our retail stores carry more than 45,000 stock keeping
units (SKU's) and offer a large number of non-grocery services. For independent
retailers in search of a one-source supplier, Seaway offers a wide assortment of
products in addition to providing marketing, advertising, and promotional
assistance, retail counseling, store engineering, and financing. Our Seaway
private label program grows larger every year. Equal in quality but priced below
the comparable national brands, Seaway-branded products deliver excellent value
to consumers and provide independently-operated retailers with a means of
increasing sales and profitability.
Our recipe is simple but has served us well and will be the basis of our
future success.
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At A Glance
<TABLE>
Net Sales
(dollars in millions)
<CAPTION>
96 95 94 93 92
<S> <C> <C> <C> <C>
$ 1,285.2 1,185.0 1,121.6 1,108.2 979.3
</TABLE>
<TABLE>
Net Income Per Common Share
<CAPTION>
96 95 94 93 92
<S> <C> <C> <C> <C>
$ 2.05 1.42 1.03 .78 .99
</TABLE>
<TABLE>
Stockholders' Equity
(dollars in millions)
<CAPTION>
96 95 94 93 92
<S> <C> <C> <C> <C>
$ 89.9 74.4 64.7 56.4 50.1
</TABLE>
<TABLE>
Capital Expenditures
(dollars in millions)
<CAPTION>
96 95 94 93 92
<S> <C> <C> <C> <C>
$ 31.2 28.1 27.1 25.8 25.8
</TABLE>
8
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Management's Discussion and Analysis of Financial Condition
and Results of Operations
RESULTS OF OPERATIONS
The following table sets forth items from the Company's Consolidated Statements
of Income as a percentage of net sales:
<TABLE>
<CAPTION>
1996 1995 1994
(52 WEEKS) (52 Weeks) (52 Weeks)
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales 100.00 100.00 100.00
Cost of goods sold 80.55 80.21 80.73
---------- ---------- ----------
Gross profit 19.45 19.79 19.27
SG&A expenses 16.88 17.61 17.35
Restructuring Charge -- -- 1.07
---------- ---------- ----------
Operating income 2.57 2.18 .85
Interest expense, net .41 .54 .63
---------- ---------- ----------
Income before taxes and accounting change 2.16 1.64 .22
Provision for income taxes .87 .66 .08
---------- ---------- ----------
Net income before accounting change 1.29 .98 .14
---------- ---------- ----------
</TABLE>
The results of operations for the fiscal year ended June 29, 1996 continue to
reflect the successful implementation of strategic initiatives which were
designed to improve operating performance and counter competitive and economic
pressures. The food distribution industry has encountered little or no inflation
over the past three years while operating costs, particularly labor and
occupancy, have contractually risen. The industry has also experienced increased
competition from non-traditional sources, such as convenience stores and
national mass merchandising chains, that has unfavorably impacted overall
industry sales and operating margins.
NET SALES
Net sales increased 8.5% to $1.285 billion in 1996, 5.7% to $1.185 billion in
1995 and 1.2% to $1.122 billion in 1994. This trend of sales increases over
those of the prior years is the result of strategic initiatives to remodel,
reposition and enlarge Company-operated retail stores, aggressive merchandising
in Company-operated retail stores, expansion of the product lines offered to the
Company's independently-operated wholesale customers, sales to new wholesale
customers and an improved economic climate in the Company's primary market area.
Additionally, 1996 and 1995 sales were favorably impacted by a full fifty-two
weeks of operations of the Company's Health and Beauty Care/General Merchandise
(HBC/GM) distribution facility which was acquired in 1994.
The Company's strategic initiatives to remodel, reposition and expand
Company-operated retail stores have resulted in the consolidation and
enlargement of Company-operated retail stores. The following table details the
number, format and size of Company-operated retail stores between years:
<TABLE>
<CAPTION>
1996 1995 1994
- ---------------------------------------------------
<S> <C> <C> <C>
Beginning of year 38 42 45
Opened -- -- 2
Closed (1) (4) (5)
------ ------ ------
End of year 37 38 42
------ ------ ------
Store Formats:
Rini-Rego
Stop-N-Shop 32 33 37
Rini-Rego Marketplace 5 5 3
Other -- -- 2
Average store square
footage (37 stores) 47,995 47,330 46,586
</TABLE>
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Sales in Company-operated retail stores increased over that of the prior year
by 5.3% in 1996 and 8.0% in 1995 as same store sales increases of 7.3% in 1996
and 9.1% in 1995 more than offset the loss of sales resulting from fewer
Company-operated retail stores. Adjusted for a 53rd week of sales in 1993, total
sales in Company-operated retail stores declined 5.4% in 1994 principally due to
a reduction in the number of Company-operated retail stores between years
coupled with declining same store sales of .4%. The reversal of same store sales
declines in 1995 was attributed to the Company's retail remodeling,
repositioning and expansion programs, aggressive merchandising, which included
the introduction of the Company's Preferred Shoppers Club, and an improved
economic climate. Additionally, the loss of sales associated with the closing of
a total of nine Company-operated retail stores between 1995 and 1994 was offset
by the addition of two newer, larger Company-operated retail stores in May 1994.
The Company's trend of same store sales increases slowed in 1996 due to the
cycling of store remodels from prior years and the timing and nature of 1996
remodels. The Company completed three major remodeling projects during 1996 and
four major remodeling projects in each of 1995 and 1994. The Company anticipates
completing six major remodeling projects during 1997 which are dependent upon
the finalization of building plans, approval of local zoning boards,
accessibility of landlords, solicitation of building contractors and appropriate
weather conditions during the building season. The Company believes its trend of
retail sales increases will continue albeit at a slower rate due largely to
increased competition from competitors' new stores and merchandising strategies
and continued competition from national mass merchandising chains diversifying
their product lines into grocery categories.
The Company's retail remodeling and repositioning initiatives, where certain
non-core stores were closed and certain core stores were remodeled, expanded or
consolidated into larger retail facilities, has proven successful, yielding
continued sales growth and improved operating leverage. Since the first quarter
of 1994, the Company has constructed or converted five former Rini-Rego
Stop-N-Shop stores to its Marketplace format. The Marketplace stores are larger,
averaging approximately 65,000 square feet, and meet the consumer's basic
grocery needs while offering an expanded product line, with emphasis on high
quality perishable departments and a variety of full service, consumer-oriented
departments.
During 1995, the Association of Stop-N-Shop Supermarkets, a northeast Ohio
advertising cooperative which includes all Company-operated retail stores,
introduced a new target marketing campaign, the Preferred Shoppers Club.
Participating shoppers receive a Preferred Shoppers Club card which entitles
them to extra discounts below normal sales prices. This program was the first of
its kind in northeast Ohio and allows the Company to offer its customers greater
value and will ultimately enhance the Company's ability to meet customer
purchasing requirements and preferences. The success of this program has
increased sales in Company-operated retail stores and proven a valuable
merchandising tool to combat competitive pressures from both traditional and
non-traditional grocery retailers. The Company's primary competitor introduced a
frequent shoppers card in March 1996. The introduction of the competitor's card
lessened the effect of the Company's Preferred Shoppers Card somewhat but has
not had a significant impact on sales in Company-operated retail stores.
However, it is still too early to assess the full impact of the competitor's
card program.
After adjusting for the 53rd week of sales in 1993, sales to
independently-operated retail stores continued a trend of increased sales over
that of the prior year with increases of 11.9% in 1996, 3.4% in 1995 and 13.9%
in
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1994. Sales to independently-operated retail stores in 1996 increased
principally because of new sales to 102 PharMor stores primarily located in the
eastern third of the United States and the addition of new customers in the
southeast Michigan area. Fiscal 1995 sales benefited from new customer additions
as well as the improving economic climate which, in turn, increased sales to
independently-operated retail stores. The acquisition of an HBC/GM distribution
facility from the Company's former HBC/GM supplier increased sales in 1994.
The Company has continued to increase its wholesale sales penetration to
existing customers, primarily in the perishable, private label and HBC/GM
product lines. The Company continues to evaluate other markets outside its
primary market area for potential distribution opportunities. As part of its
1994 acquisition of an HBC/GM distribution facility, the Company began servicing
Hills Department Stores throughout the eastern third of the United States. In
1995, the Company opened a sales office in the Detroit area focusing on meat
distribution and new business development.
Total Company sales also benefited from an improved economy in the Company's
primary market area. The economy in northeast Ohio, which was stagnant in 1994,
began to expand early in 1995 and continued to improve throughout both 1995 and
1996. The improved economic climate, combined with the Company's merchandising
programs in both Company-operated retail stores and independently-operated
retail stores, resulted in consumers increasing the amount of their average
purchase and trading-up in many commodity lines.
GROSS PROFIT
Gross profit, as a percentage of sales, fluctuated from 19.27% in 1994 to
19.79% in 1995 and 19.45% in 1996. This fluctuation in the gross profit
percentage is principally a function of shifting sales mix between years. Sales
to independently-operated retail stores carry a lower gross profit percentage
than sales in Company-operated retail stores. As such, a shift in the mix of
these sales impacts overall gross profit percentages. Sales generated in
Company-operated retail stores as a percentage of total Company sales increased
from 50.6% in 1994 to 51.7% in 1995 and then decreased to 50.2 % in 1996. This
mirrors the shift in the gross profit percentage. The Company has been able to
maintain gross profit percentages on sales to independently-operated retail
stores and in Company-operated retail stores through improved procurement
systems, merchandising and effective inventory management.
SELLING, GENERAL AND ADMINISTRATIVE (SG&A) EXPENSES
SG&A expenses, as a percentage of sales, were 16.88% in 1996, 17.61% in 1995
and 17.35% in 1994. These shifts also reflect the change in the sales mix
between years. Sales in Company-operated retail stores require higher SG&A costs
than sales to independently-operated retail stores. Accordingly, the SG&A
percentage increased and decreased with the above mentioned sales mix. The
Company has been able to minimize the impact of the shift of sales mix on the
SG&A percentage through improved productivity resulting from the implementation
of Total Quality Management initiatives and improved leverage of certain fixed
SG&A expenses over a higher sales volume.
RESTRUCTURING CHARGE
The Company recorded a restructuring charge in 1994 reflecting costs
associated with the Company's long range strategic initiatives to reposition its
Company-operated retail store operations. These initiatives include the
disposition of non-core stores and the consolidation of certain Company-operated
retail store locations into larger retail facilities.
The Company's 1994 restructuring charge included a $4 million non-cash charge
to write down fixed assets to their net realizable value and an $8 million
charge for future cash expenditures (principally occupancy costs net
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<PAGE> 14
of expected sublease income) related to the closing of thirteen Company-operated
retail stores. The Company utilized $1.7 million, $.6 million and $1.3 million
of cash for its restructuring charges in 1996, 1995 and 1994, respectively.
The Company closed five of the stores included in the restructuring charge in
fiscal 1994, four of these stores in 1995 and one in 1996. The remainder of
these Company-operated retail stores will be closed over the next three to four
years. The Company plans to operate approximately 35 to 38 expanded or newly
remodeled Company-operated retail stores by the end of 1998, which is expected
to result in a limited reduction of overall employee levels.
The Company's restructuring charge reflects the Company's overall plan to
reposition its Company-operated retail stores, focusing on its Rini-Rego
Stop-N-Shop core-store format. The Company does not currently anticipate any
future restructuring charges.
INTEREST EXPENSE, NET
Interest expense, net of interest income, decreased from $7.0 million in 1994,
to $6.4 million in 1995, to $5.3 million in 1996. These decreases are a function
of lower borrowing levels under the Company's bank credit facilities which were
the product of programs to reduce the investment in distribution inventories and
increase inventory turns and increased cash flow from operations. The average
interest rate charged under the Company's bank credit facilities was 8.06% in
1996, 8.43% in 1995 and 6.74% in 1994. The increase in this interest rate
between 1995 and 1994 was principally the result of an increase in the bank's
prime lending rate. The decrease in this rate between 1996 and 1995 was the
result of negotiated interest rate reductions in 1996 and 1995 and the Company's
utilization of LIBOR pricing. The Company currently borrows funds under its bank
credit facilities at either the bank's prime lending rate or 1.25% over LIBOR.
INCOME TAXES
The Company provided for income taxes at an effective tax rate of 40.1% in
1996, 40.3% in 1995 and 37.0% in 1994. The increase in the Company's effective
tax rate in 1995 represents a higher provision for federal income taxes as a
result of the Company being taxed at a higher federal tax rate and a higher
state income tax provision because of higher income for financial reporting
purposes. The lower effective tax rate in 1994 was also the result of a lower
provision for state income taxes due to lower income for financial reporting
purposes. The Company accounts for the franchise tax portion of its state income
tax provision as an operating expense.
The Company adopted the provisions of Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes" (SFAS No. 109) in 1994. The
Company elected not to restate prior year's financial statements and recorded
the cumulative effect of the accounting change. As a result, the Company
recorded a one-time income item of $6.9 million to reflect the cumulative effect
of the change in accounting for income taxes in 1994. The one-time income item
was principally the result of benefiting the expected utilization of net
operating loss carryforwards (NOL) and the adjustment of deferred tax balances
to reflect changes in statutory rates. See Note 4 of the Notes to Consolidated
Financial Statements for further discussion.
CAPITAL RESOURCES
AND LIQUIDITY
The Company's primary source of capital has historically come from internally
generated funds. However, the Company's intensified capital expenditure
requirements and higher working capital needs associated with the acquisition of
its HBC/GM distribution facility increased the Company's reliance on its bank
credit facilities in 1994. During 1996 and 1995, debt levels
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<PAGE> 15
decreased due to an increase in net income, an increase in the distribution
inventory turns and the resulting decrease in working capital requirements and
the repayment of notes by independently-operated retailers.
Operating activities generated $51.1 million of cash in 1996, $46.8 million in
1995 and $13.6 million in 1994. In addition to increases in net income, cash
provided by operating activities was favorably impacted by the above mentioned
repayment of customer notes (1996), Company programs to maximize its return on
inventories and the timing of payments on accrued expenses and other
liabilities. The success of Company programs to lower distribution inventories
and increase inventory turns resulted in a greater percentage of 1996 and 1995
distribution inventories being financed through trade accounts payable, without
extending vendor terms, rather than through the Company's revolving credit
facilities. Accrued expenses and other liabilities increased in 1994 due
primarily to the $12 million restructuring charge. In 1995, accrued expenses and
other liabilities increased because of increased income tax accruals due to
increased net income and larger payroll related accruals. In 1996, cash was
utilized to pay accrued income taxes from the prior year as well as 1996 tax
estimates.
The lower level of cash provided by operations in 1994 was a function of lower
earnings coupled with the increased working capital requirements of expanded
sales to independently-operated retailers. The food distribution industry
requires a significant investment in receivables and inventories to meet
customer needs. Increased levels of inventories were required in 1994 to
support the new HBC/GM distribution facility and forward buy opportunities.
Additional wholesale customer financing was also made available to support the
acquisition by two independently-operated wholesale customers of four former
Company-operated retail stores in the Akron/Canton area. These notes were
repaid during 1996. Cash provided by operating activities in 1994 was also
impacted by a $6.9 million non-cash credit for the adoption of SFAS No. 109.
Since cash provided by operating activities was utilized to reduce borrowings
under the Company's revolving lines of credit, and increased inventory turns
resulted in a higher trade accounts payable to FIFO inventory ratio, working
capital exclusive of deferred income taxes decreased to $5.9 million in 1996
from $13.9 million in 1995 and $36.4 million in 1994. The Company's ratio of
current assets to current liabilities, exclusive of deferred income taxes, also
decreased to 1.05:1 at the end of 1996 from 1.13:1 and 1.43:1 at the end of 1995
and 1994, respectively. These shifts reflect the changes in working capital
components that are discussed above.
Lower borrowing levels under the Company's bank credit facilities reduced the
Company's long-term liabilities to equity ratio to .56:1 at the end of 1996 from
1.00:1 at the end of 1995 and 1.46:1 at the end of 1994. The Company has
continued to improve its ratio of total liabilities to equity lowering it to
1.92:1 at the end of 1996 from 2.61:1 and 2.98:1 at the end of 1995 and 1994,
respectively.
The Company utilized $31.2 million of cash flow for capital expenditures in
1996 which is consistent with prior year levels. This amount reflects the
Company's acquisition of its Aurora Road and Cash-N-Carry distribution
facilities, which had previously been leased, and lower retail capital
expenditure levels. The Company used $20.9 million of its capital expenditures
on retail remodeling projects ($23.2 million in 1995 and $22.3 million in 1994),
$8.7 million for distribution facilities and equipment ($2.5 million in 1995 and
$3.4 million in 1994) and $1.6 million on data processing systems upgrades and
corporate equipment and vehicles ($2.4 million in 1995 and $1.4 million in
1994).
Retail capital expenditures were made to modernize and expand Company-operated
retail locations. At the
13
<PAGE> 16
end of 1996, the Company operated 37 retail locations compared to 38 retail
locations at the same time last year. The store closed during 1996 was closed
temporarily during the construction of its replacement store. The increase in
distribution facilities and equipment expenditures in 1996 was partially offset
by the sale of the Aurora Road facility at the end of 1996. This facility was
not used by the Company for any significant operating activities.
The Company anticipates the level of capital expenditures for the next two
fiscal years will be slightly higher than the previous three fiscal years
principally because of the acceleration of the Company's remodeling programs.
Capital expenditure levels will be maintained in the $35-45 million range over
the next three fiscal years which will complete the Company's remodeling and
expansion of its existing core stores. Additionally, the Company is expanding
its Bedford Heights, Ohio distribution facilities to meet the needs of its
distribution operations. The Company believes that cash flow from operations and
the unused portion of its bank credit facilities ($52.5 million at the end of
1996) will adequately fund planned capital expenditures, normal ongoing business
activities and scheduled debt principal repayments.
IMPACT OF INFLATION
Inflation increases the Company's major costs, inventory and labor. Because of
the high velocity of inventory turnover in the food distribution industry and
the Company's use of the Last-in, First-out (LIFO) valuation method for a
majority of its inventories, the impact of inflation is normally reflected very
quickly in the results of operations. The food distribution industry has
experienced little or no food price inflation over the last three years.
Accordingly, the Company's provisions for LIFO inventories for the past three
years were as follows: expense of $773,000 and $69,000 in 1996 and 1995,
respectively, and income of $486,000 in 1994. Experience indicates that highly
competitive market conditions may prevent the Company from fully recovering
inflation-driven costs through retail pricing alone.
RECENT ACCOUNTING PRONOUNCEMENTS
Statement of Financial Accounting Standards (SFAS) No. 121, "Accounting for
the Impairment of Long-lived Assets and for Long-lived Assets to be Disposed
Of," must be adopted by the Company in the first quarter of fiscal 1997. This
standard requires the Company to evaluate the recoverability of long-lived
assets based on expected future cash flows. The adoption of this standard is not
expected to have a material impact on the Company's financial position or
results of operations.
SFAS No. 123, "Accounting for Stock-Based Compensation," must be adopted by
the Company no later than the fiscal year ending June 28, 1997. This standard
establishes a fair value method for accounting for stock-based compensation
plans either through recognition or disclosure. The adoption of this standard is
not expected to have a material impact on the Company's financial position or
results of operations.
14
<PAGE> 17
Riser Foods, Inc. and Subsidiaries
Consolidated Statements of Income
For the fiscal years ended June 29, 1996, July 1, 1995 and July 2, 1994
<TABLE>
<CAPTION>
1996 1995 1994
(In thousands, except share and per share data) (52 WEEKS) (52 weeks) (52 weeks)
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET SALES $1,285,209 $1,184,993 $1,121,604
COST OF GOODS SOLD 1,035,157 950,433 905,456
---------- ---------- ----------
Gross profit 250,052 234,560 216,148
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 217,006 208,716 194,626
RESTRUCTURING CHARGE -- -- 12,000
---------- ---------- ----------
Operating income 33,046 25,844 9,522
INTEREST EXPENSE (6,254) (7,559) (7,802)
INTEREST INCOME 936 1,208 788
---------- ---------- ----------
INCOME BEFORE INCOME TAXES AND CHANGE IN ACCOUNTING PRINCIPLE 27,728 19,493 2,508
PROVISION FOR INCOME TAXES:
State and local 2,094 1,367 46
Federal 9,028 6,485 882
---------- ---------- ----------
11,122 7,852 928
NET INCOME BEFORE CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING
PRINCIPLE 16,606 11,641 1,580
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE:
Accounting for income taxes -- -- 6,866
---------- ---------- ----------
NET INCOME 16,606 11,641 8,446
LESS PREFERRED STOCK DIVIDENDS 11 144 144
---------- ---------- ----------
NET INCOME FOR COMMON STOCKHOLDERS $ 16,595 $ 11,497 $ 8,302
---------- ---------- ----------
NET INCOME PER COMMON SHARE:
Net income before cumulative effect of change in
accounting principle $ 2.05 $ 1.42 $ .18
Cumulative effect of change in accounting principle:
Accounting for income taxes -- -- .85
---------- ---------- ----------
NET INCOME PER COMMON SHARE $ 2.05 $ 1.42 $ 1.03
---------- ---------- ----------
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 8,096,473 8,080,900 8,080,901
---------- ---------- ----------
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an
integral part of these statements.
15
<PAGE> 18
Riser Foods, Inc. and Subsidiaries
Consolidated Balance Sheets
At June 29, 1996 and July 1, 1995
<TABLE>
<CAPTION>
(Dollars in thousands, except share data) 1996 1995
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 3,541 $ 4,075
Trade accounts receivable, net 36,903 38,272
Inventories 72,406 74,042
Deferred income taxes 9,066 10,022
Prepaid expenses 4,613 4,895
-------- --------
Total current assets 126,529 131,306
PROPERTY, EQUIPMENT AND CAPITAL LEASES:
Land 7,351 4,230
Buildings and improvements 47,102 43,750
Equipment 80,309 76,700
Leasehold improvements 69,000 61,146
-------- --------
203,762 185,826
Less -- Allowances for depreciation, amortization and
loss on disposal of fixed assets 79,762 67,729
-------- --------
124,000 118,097
OTHER ASSETS:
Notes receivable 4,784 10,868
Deferred income taxes 4,947 6,119
Other 2,088 2,071
-------- --------
Total other assets 11,819 19,058
-------- --------
TOTAL ASSETS $262,348 $268,461
-------- --------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 59,433 $ 52,209
Accrued expenses 41,790 45,210
Current portion of:
Debt 5,513 4,861
Capital lease obligations 1,284 1,392
Self insurance reserves 3,555 3,750
-------- --------
Total current liabilities 111,575 107,422
LONG-TERM PORTION OF:
Debt 32,514 55,749
Capital lease obligations 5,531 6,840
Self insurance reserves 12,595 11,845
-------- --------
50,640 74,434
OTHER LIABILITIES 10,191 12,231
STOCKHOLDERS' EQUITY:
Series A Preferred Stock -- $100 par value; $8.00 cumulative
convertible, nonvoting; 30,000 shares authorized;
18,044 shares outstanding in 1995 -- --
Common Stock -- $.01 par value:
Class A -- 20,000,000 shares authorized; 7,174,787 and 7,125,287
shares outstanding in 1996 and 1995, respectively 72 71
Class B -- 5,000,000 shares authorized; 955,613 shares
outstanding 10 10
Paid-in capital 36,138 35,546
Retained earnings 53,722 38,747
-------- --------
Total stockholders' equity 89,942 74,374
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $262,348 $268,461
-------- --------
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an
integral part of these statements.
16
<PAGE> 19
Riser Foods, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
For the fiscal years ended June 29, 1996, July 1, 1995 and July 2, 1994
<TABLE>
<CAPTION>
1996 1995 1994
(In thousands) (52 WEEKS) (52 weeks) (52 weeks)
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 16,606 $ 11,641 $ 8,446
Adjustments to reconcile net income to net cash provided by
operating activities:
Cumulative effect of change in accounting principle -- -- (6,866)
Depreciation and amortization 17,862 17,448 14,804
Loss on sale of assets 688 828 639
Deferred income tax provision 2,128 (2,496) (3,269)
Changes in assets and liabilities:
Decrease (increase) in accounts and notes receivable 7,453 171 (6,743)
Decrease (increase) in inventories 1,636 237 (1,797)
Decrease (increase) in prepaid expenses 282 (57) (231)
Increase in other assets (295) (343) (779)
Increase (decrease) in accounts payable 7,224 6,595 (1,574)
Increase in self insurance reserves 555 1,314 474
(Decrease) increase in accrued expenses and other
liabilities (2,995) 11,671 10,395
Other changes (66) (240) 95
--------- --------- ---------
Net cash provided by operating activities $ 51,078 $ 46,769 $ 13,594
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of fixed assets $ (31,226) $ (28,050) $ (27,132)
Proceeds from sale of fixed assets 4,840 2,420 876
--------- --------- ---------
Net cash used for investing activities (26,386) (25,630) (26,256)
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings on revolving lines of credit 614,085 651,479 917,069
Repayments of revolving lines of credit (636,712) (666,655) (900,290)
Additional borrowings 5,093 1,425 6,914
Debt repayments (5,237) (6,165) (9,435)
Repayment of capital lease obligations (1,417) (1,380) (1,470)
Common stock dividends (1,620) -- --
Stock options exercised 593 -- --
Preferred stock dividends (11) (144) (144)
--------- --------- ---------
Net cash (used for) provided by financing activities (25,226) (21,440) 12,644
--------- --------- ---------
NET DECREASE IN CASH AND CASH EQUIVALENTS (534) (301) (18)
CASH AND CASH EQUIVALENTS, AT BEGINNING OF YEAR 4,075 4,376 4,394
--------- --------- ---------
CASH AND CASH EQUIVALENTS, AT END OF YEAR $ 3,541 $ 4,075 $ 4,376
--------- --------- ---------
SUPPLEMENTAL DATA:
Interest paid $ 6,498 $ 7,571 $ 7,627
--------- --------- ---------
Income taxes paid $ 13,390 $ 6,807 $ 6,417
--------- --------- ---------
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an
integral part of these statements.
17
<PAGE> 20
Riser Foods, Inc. and Subsidiaries
Consolidated Statements of Stockholders' Equity
<TABLE>
<CAPTION>
Class Class
Preferred A B Paid-In Retained
(In thousands, except per share data) Stock Common Common Capital Earnings
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
BALANCE AT JULY 3, 1993 $ 1,804 $ 71 $ 10 $35,546 $ 18,948
Net income -- -- -- -- 8,446
Preferred stock dividends of $8 per share -- -- -- -- (144)
--------- ------ ------ ------- --------
BALANCE AT JULY 2, 1994 1,804 71 10 35,546 27,250
Net income -- -- -- -- 11,641
Preferred stock dividends of $8 per share -- -- -- -- (144)
Redemption of Preferred Stock (1,804) -- -- -- --
--------- ------ ------ ------- --------
BALANCE AT JULY 1, 1995 -- 71 10 35,546 38,747
Net income -- -- -- -- 16,606
Preferred stock dividends of $.61 per share -- -- -- -- (11)
Common stock dividends of $.20 per share on
Class A and B Common Stock -- -- -- -- (1,620)
Stock options exercised -- 1 -- 384 --
Tax Benefit of stock options exercised -- -- -- 208 --
--------- ------ ------ ------- --------
Balance at June 29, 1996 $ -- $ 72 $ 10 $36,138 $ 53,722
--------- ------ ------ ------- --------
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an
integral part of these statements.
Report of Independent Public Accountants
To Riser Foods, Inc. and Subsidiaries:
We have audited the accompanying consolidated balance sheets of RISER FOODS,
INC. (a Delaware corporation) AND SUBSIDIARIES as of June 29, 1996 and July 1,
1995, and the related consolidated statements of income, stockholders' equity
and cash flows for each of the three fiscal years in the period ended June 29,
1996. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Riser Foods, Inc. and
Subsidiaries as of June 29, 1996 and July 1, 1995, and the results of their
operations and their cash flows for each of the three fiscal years in the period
ended June 29, 1996, in conformity with generally accepted accounting
principles.
As explained in Note 4 to the Consolidated Financial Statements, effective
July 4, 1993, the Company changed its method of accounting for income taxes as
required by Statement of Financial Accounting Standards No. 109.
ARTHUR ANDERSEN LLP
Cleveland, Ohio,
August 30, 1996.
18
<PAGE> 21
Riser Foods, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
At June 29, 1996 and July 1, 1995
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
SEGMENT INFORMATION
Riser Foods, Inc. (Riser or the Company) is engaged in one business segment,
the food distribution industry. The Company distributes national brand and
private label products through Company-operated and other independently-operated
retail stores throughout northeast and central Ohio, southeastern Michigan and
western Pennsylvania. The Company operates 37 retail locations in northeast
Ohio. The following is a detail of the number of Company-operated stores by
year:
<TABLE>
<CAPTION>
1996 1995 1994
- ---------------------------------------------------
<S> <C> <C> <C>
Beginning of year 38 42 45
Opened -- -- 2
Closed (1) (4) (5)
------ ------ ------
End of year 37 38 42
------ ------ ------
</TABLE>
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Riser and its
subsidiaries. All material intercompany accounts and transactions have been
eliminated.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
RECENT ACCOUNTING PRONOUNCEMENTS
Statement of Financial Accounting Standards (SFAS) No. 121, "Accounting for
the Impairment of Long-lived Assets and for Long-lived Assets to be Disposed
Of," must be adopted by the Company in the first quarter of fiscal 1997. This
standard requires the Company to evaluate the recoverability of long-lived
assets based on expected future cash flows. The adoption of this standard is not
expected to have a material impact on the Company's financial position or
results of operations.
SFAS No. 123, "Accounting for Stock-Based Compensation," must be adopted by
the Company no later than the fiscal year ending June 28, 1997. This standard
establishes a fair value method for accounting for stock-based compensation
plans either through recognition or disclosure. The adoption of this standard is
not expected to have a material impact on the Company's financial position or
results of operations.
FISCAL YEAR
The Company's fiscal year ends on the Saturday closest to June 30. Fiscal
1996, 1995 and 1994 consist of the 52 weeks ended June 29, 1996, July 1, 1995
and July 2, 1994, respectively.
CASH EQUIVALENTS
The Company considers all highly liquid investments with an initial maturity
of three months or less to be cash equivalents.
INVENTORIES
Inventories, principally perishable and nonperishable food products, general
merchandise, health and beauty care items and related products for resale, are
stated at the lower of cost or market. Cost is determined through the use of the
last-in, first-out (LIFO) method for a majority of consolidated inventories: 81%
at June 29, 1996 and 77% at July 1, 1995. The first-in, first-out (FIFO) method
is used to determine cost for the remaining inventories which consist
principally of perishable products.
If the FIFO method had been used to determine cost for all Company
inventories, total inventories would have been higher than reported by
approximately $7,224,000 at June 29, 1996 and $6,452,000 at July 1, 1995.
PROPERTY, EQUIPMENT AND CAPITAL LEASES
Property and equipment are recorded at cost and depreciated using the
straight-line method at annual rates sufficient to amortize the cost of the
assets during their estimated useful lives. Accelerated depreciation methods are
used for income tax purposes. Amortization of property under capital leases is
computed using the straight-
19
<PAGE> 22
Riser Foods, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
line method over the shorter of the estimated life of the asset or the term of
the lease. The following ranges of depreciable lives are used:
<TABLE>
<S> <C>
Buildings and Improvements 19 to 40 years
Leasehold Improvements 5 to 20 years
Equipment 3 to 15 years
</TABLE>
SELF INSURANCE RESERVES
The Company is primarily self insured for property loss, general liability
costs and workers' compensation. Estimated costs of these self insurance
programs are accrued at current cost based on projected settlements for claims
and include estimates for claims incurred but not reported. Any adjustments made
to previously recorded reserves are reflected in current operating results.
Amounts charged to expense for self insured liabilities were $4,394,000,
$4,726,000, $3,940,000 in 1996, 1995 and 1994, respectively.
REVENUE RECOGNITION
Revenues from product sales are recognized upon shipment of the product from
warehouse distribution to independently-operated retail stores and at the point
of sale for Company-operated retail stores.
STORE PRE-OPENING COSTS
Store pre-opening cos
ts, primarily employee training, inventory stocking and
advertising, are charged to expense concurrent with store openings.
ADVERTISING COSTS
Costs incurred for producing and communicating advertising are expensed when
incurred.
RECLASSIFICATIONS
Certain reclassifications have been made to prior year financial statements to
conform with current year presentation.
NET INCOME PER SHARE
Net income per share is computed by dividing net income less preferred stock
dividends by the weighted average number of common shares outstanding.
Outstanding stock options do not have a significant dilutive effect on net
income per share.
(2) TRADE ACCOUNTS AND NOTES RECEIVABLE
Trade accounts receivable include $2,992,000 and $5,386,000 of the current
portion of notes receivable at June 29, 1996 and July 1, 1995, respectively.
Trade accounts receivable are net of an allowance for doubtful accounts of
$2,766,000 at June 29, 1996 and $2,953,000 at July 1, 1995.
The Company's trade accounts and notes receivable are primarily with various
independently-operated wholesale customers who are engaged in retail food
distribution in northeast and central Ohio, western Pennsylvania and
southeastern Michigan.
The Company's notes receivable principally arise from the financing of store
leaseholds, inventory and fixed assets related to the Company's
independently-operated wholesale customers. Loans to independent retailers, as
well as trade accounts receivable, are primarily collateralized by the
retailers' inventory, equipment and fixtures. The notes range in length from 1
to 7 years and primarily bear interest at prime plus 1.0% or 1.5%. Management
believes the estimated fair market value of the notes approximates net carrying
value at June 29, 1996 and July 1, 1995.
(3) ACCRUED EXPENSES
Accrued expenses include the following:
<TABLE>
<CAPTION>
(In thousands) 1996 1995
- -------------------------------------------------
<S> <C> <C>
Accrued payroll and
related expenses $13,359 $12,536
Accrued customer rebates 7,165 6,570
State and local taxes 5,683 5,752
Accrued income taxes 1,665 5,643
Closed facilities reserve,
current portion 1,945 3,458
Redeemed preferred stock
(See Note 9) -- 1,895
Other accrued expenses 11,973 9,356
------- -------
$41,790 $45,210
------- -------
</TABLE>
20
<PAGE> 23
(4) INCOME TAXES
At the beginning of 1994, the Company adopted the provisions of SFAS No. 109
"Accounting for Income Taxes". This statement requires that the liability method
of accounting for income taxes be used rather than the deferred method
previously used. The Company elected not to restate prior years' financial
statements and the cumulative effect of this accounting change was to increase
1994 net income by $6,866,000, or $.85 per share. The cumulative effect is
principally the result of benefiting the expected utilization of tax net
operating loss carryforwards (NOL) and the adjustment of deferred tax balances
to reflect changes in statutory rates.
The income tax provision in the accompanying consolidated statements of income
differs from the provision at statutory rates as follows:
<TABLE>
<CAPTION>
(In thousands) 1996 1995 1994
- ---------------------------------------------------
<S> <C> <C> <C>
Income before income
taxes and change in
accounting
principle $27,728 $19,493 $2,508
------- ------- ------
Tax provision at
federal statutory
rates $ 9,705 $ 6,822 $ 853
State and local
income taxes, net
of federal income
tax benefit 1,361 889 30
Officers' life
insurance 52 100 28
Other 4 41 17
------- ------- ------
Provision for income
taxes $11,122 $ 7,852 $ 928
------- ------- ------
</TABLE>
The Company's income tax provision consists of the following components:
<TABLE>
<CAPTION>
(In thousands) 1996 1995 1994
- ----------------------------------------------------
<S> <C> <C> <C>
Current:
Federal $ 7,150 $ 8,281 $ 3,351
State and
local 1,844 2,067 846
------- ------- -------
8,994 10,348 4,197
Deferred:
Federal 1,878 (1,796) (2,469)
State and
local 250 (700) (800)
------- ------- -------
2,128 (2,496) (3,269)
------- ------- -------
Provision for
income taxes $11,122 $ 7,852 $ 928
------- ------- -------
</TABLE>
Significant components of the Company's net deferred tax asset at June 29,
1996 and July 1, 1995, are as follows:
<TABLE>
<CAPTION>
(In thousands) 1996 1995
- -------------------------------------------------
<S> <C> <C>
DEFERRED TAX LIABILITIES:
Property, equipment and
capital leases $(5,894) $(6,342)
State and local taxes
other than income (605) (601)
------- -------
(6,499) (6,943)
DEFERRED TAX ASSETS:
Reserve for uncollectible
accounts 1,569 1,598
Closed facilities reserve 3,451 5,419
Self insurance reserves 6,122 5,957
Employees' retirement
benefits 1,853 1,721
Accruals not currently
deductible 3,728 4,205
Net operating loss
carryforwards 6,529 7,156
Other 1,908 1,676
------- -------
25,160 27,732
VALUATION ALLOWANCE (4,648) (4,648)
------- -------
NET DEFERRED TAX ASSET $14,013 $16,141
------- -------
</TABLE>
The Company has gross NOL totaling $19,203,000 which expire as follows (in
thousands):
<TABLE>
<CAPTION>
Year NOL
- ----------------
<S> <C>
2001 $13,815
2002 5,388
-------
$19,203
-------
</TABLE>
SFAS No. 109 requires that the tax benefit of such NOL be recognized as an
asset to the extent the Company assesses the utilization of such NOL to be "more
likely than not". Based upon the Company's requirements to meet profitability at
both the subsidiary level and consolidated level and tax regulations which limit
the annual amount of NOL available for deduction and carryforward period, the
Company does not currently believe it is more likely than not that the entire
amount of NOL will be utilized before they expire. As such, the valuation
allowance of $4,648,000 established upon the adoption of SFAS No. 109 is
maintained. To the extent it is determined that such valuation allowance is no
longer
21
<PAGE> 24
Riser Foods, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
appropriate, income tax expense of future periods will be favorably impacted.
(5) LONG-TERM DEBT
Long-term debt is comprised of the following:
<TABLE>
<CAPTION>
(In thousands) 1996 1995
- -------------------------------------------------
<S> <C> <C>
Borrowings under bank
credit facilities:
Revolving lines of
credit $ -- $22,627
Term loan 6,857 8,571
Taxable Variable
Rate Demand Notes 7,000 9,000
9.75% Subordinated
Debentures, less
unamortized issuance
discount of $1,071 and
$1,225 at 1996 and
1995, respectively,
$655 due annually
beginning December 30,
1997, with remainder
due in 2001 12,021 11,867
Financing leases 9,418 5,498
Real estate mortgages at
rates ranging from
8.75% to 10% 2,300 2,534
Other notes payable 431 513
------- -------
38,027 60,610
Less -- Current
maturities 5,513 4,861
------- -------
Long-term Debt $32,514 $55,749
------- -------
</TABLE>
The Company's bank credit facilities (Facilities), which provide for revolving
lines of credit, letters of credit and a term loan up to an aggregate of $73.9
million, expire in July 1998. Effective March 1, 1996, the Company negotiated
new interest rates for borrowings under the Facilities. Interest under the
Facilities accrues at either the bank's prime lending rate or LIBOR plus 1.25%,
at the Company's option, with interest paid monthly. Commitment fees
representing .25% per annum of the unused portion of the facilities are paid
monthly. Agency fees of $5,000 are paid quarterly. The term loan is payable in
quarterly installments of $428,571 over five years with a balloon payment due in
April 1998. Available unused borrowing capacity under these Facilities at June
29, 1996 was approximately $52.5 million.
The Facilities consist of separate credit agreements for each of the Company's
significant operating entities (collectively the Consolidated Credit Agreement).
Borrowings under each entity's individual facility cannot exceed 85% of the
respective entity's qualified receivables, plus from 55% to 65% of eligible
inventories and 100% of eligible cash and cash equivalents, less certain
reserves and obligations, all as defined in the Consolidated Credit Agreement.
The Facilities are secured by substantially all the assets of Riser and each
individual credit facility is cross-guaranteed by all other subsidiaries and
guaranteed by Riser.
Among other covenants, the Consolidated Credit Agreement requires that the
Company maintain, on a consolidated basis, minimum levels of tangible net worth
and cash flows and a minimum ratio of liabilities to tangible net worth which
vary each fiscal year. The agreement further provides for limitations on
dividends and capital expenditures. The Company is in compliance with all
covenants at June 29, 1996.
The Company's Taxable Variable Rate Demand Notes (Notes) bear interest at a
variable rate based on the higher of the average 30-day or 90-day commercial
paper rate, plus a market increment which at June 29, 1996 was .125%, payable
monthly. Principal under the Notes is payable in annual installments of
$2,000,000 through December 1, 1997 and $3,000,000 on December 1, 1998. The
Notes are secured by a bank letter of credit. The bank letter of credit expires
in December 1998, has an annual fee of 1% on the outstanding note balance, and
is secured by the Facilities.
Concurrent with the issuance of the Notes, the Company entered into an
exchange transaction which fixed the higher of the 30-day or 90-day commercial
paper rate at 6.50% through December 1, 1994 at dollar amounts which correspond
to the Notes outstanding. Until the expiration of the exchange contract, the
Company recorded interest expense on the Notes as if the interest rate was fixed
at 6.50%.
The 9.75% Subordinated Debentures are recorded net of an original issue
discount, based on an imputed interest rate of 12%, which is being amortized
over the term of the indebtedness using the effective interest method.
22
<PAGE> 25
These debentures, originally issued by a subsidiary of the Company, require
semiannual interest payments and may be redeemed at the Company's option at 100%
of the principal amount.
The Company finances certain store fixtures and equipment associated with
programs to remodel and expand its Company-operated retail stores under
financing agreements with seven year terms and bearing interest at rates ranging
from 6.9% to 9.2%.
Certain property with an aggregate net value for financial reporting purposes
of $10,953,000, was pledged to secure real estate first mortgages on June 29,
1996.
Future maturities of long-term debt as of June 29, 1996, are summarized as
follows:
<TABLE>
<CAPTION>
(In thousands)
-------------------------------------
<S> <C>
1997 $ 5,513
1998 9,718
1999 5,728
2000 2,894
2001 2,565
2002 and thereafter 11,609
-------
$38,027
-------
</TABLE>
No quoted market prices are available for any of the Company's long-term debt
as it is not actively traded. However, management believes the carrying values
of the Company's borrowings under the Facilities, the Notes and real estate
mortgages approximate their fair values as all bear interest at current market
rates. It is not practical to estimate the fair value of the Company's 9.75%
Subordinated Debentures because of the inability to estimate fair value without
incurring excessive costs.
(6) LEASES
The Company leases many of its retail store locations, warehouse facilities
and certain operating equipment under capital and operating leases. Most of the
retail store leases contain contingent rent clauses based on sales levels. In
most instances, the Company has the option to extend the term of the lease. Some
of the retail store locations and the warehouse facilities are leased from
parties that are related through common ownership and control.
Leased property under capital leases, which is included in property, equipment
and capital leases, consisted of the following amounts:
<TABLE>
<CAPTION>
(In thousands) 1996 1995
- -------------------------------------------------
<S> <C> <C>
Buildings $10,455 $11,916
Equipment 1,316 1,509
------- -------
11,771 13,425
Less -- Allowance for
amortization (8,247) (8,862)
------- -------
$ 3,524 $ 4,563
------- -------
</TABLE>
The following is a schedule of future minimum lease payments under
noncancelable operating and capital leases as of June 29, 1996:
<TABLE>
<CAPTION>
(In thousands) Operating Leases Capital Leases
Related Unrelated Related Unrelated
- ---------------------------------------------------------
<S> <C> <C> <C> <C>
1997 $ 1,508 $11,100 $ 167 $ 2,027
1998 1,534 9,950 180 1,466
1999 1,557 9,345 193 1,154
2000 1,557 8,075 193 1,112
2001 1,557 7,726 193 1,029
Thereafter 3,771 49,682 1,260 2,285
------- ------- ------- -------
$11,484 $95,878 2,186 9,073
------- -------
Less --
Amounts representing
executory costs -- 414
Imputed interest 1,348 2,682
------- -------
Present value of net minimum
lease payments 838 5,977
Less -- Current portion -- 1,284
------- -------
$ 838 $ 4,693
------- -------
</TABLE>
The Company also subleases certain of its leased retail store locations and a
portion of its warehouses. Future minimum rental income under subleases of
operating and capital leases at June 29, 1996 amounted to $13,765,000.
23
<PAGE> 26
Riser Foods, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
Total rental expense for unrelated operating leases was as follows:
<TABLE>
<CAPTION>
(In thousands) 1996 1995 1994
- ----------------------------------------------------
<S> <C> <C> <C>
Minimum rental $10,506 $10,223 $ 8,656
Contingent
rental 263 336 141
Sublease rental
income (1,789) (1,655) (1,976)
------- ------- -------
$ 8,980 $ 8,904 $ 6,821
------- ------- -------
</TABLE>
Total rental expense for related operating leases was as follows:
<TABLE>
<CAPTION>
(In thousands) 1996 1995 1994
- ----------------------------------------------------
<S> <C> <C> <C>
Minimum rental $ 1,351 $ 2,101 $ 2,211
Contingent
rental 68 35 35
Sublease rental
income (778) (730) (591)
------- ------- -------
$ 641 $ 1,406 $ 1,655
------- ------- -------
</TABLE>
(7) DISPOSITION OF FACILITIES
The Company provides for the estimated costs of closing facilities concurrent
with making the decision to close. The types of costs provided primarily include
future lease payments net of estimated sublease income and expected losses on
disposal of assets.
An analysis of the activity in the closed facilities reserve is as follows:
<TABLE>
<CAPTION>
(In thousands) 1996 1995 1994
- ---------------------------------------------------
<S> <C> <C> <C>
Beginning balance $13,664 $14,887 $ 5,923
Restructuring
charges -- -- 12,000
Payments and
other
deductions (4,559) (1,223) (3,036)
------- ------- -------
Ending balance $ 9,105 $13,664 $14,887
------- ------- -------
</TABLE>
The 1994 restructuring charge represented estimated costs associated with the
Company's retail store consolidation plan to close smaller, outdated
Company-operated retail stores representing approximately 456,000 square feet.
Certain of these stores were replaced by newer, larger stores representing
approximately 431,000 square feet. Some of these newer stores are operated by
wholesale customers and the remaining stores are expanded Company-operated
retail stores. At June 29, 1996, the Company has closed ten stores included in
the 1994 restructuring charge.
At June 29, 1996 the net book value of fixed assets and property relating to
closed facilities was $3,227,000. An allowance to reduce these assets to their
estimated net realizable value is included in the allowance for depreciation,
amortization and loss on disposal, while the long-term portion of the reserve
for closing facilities is classified in other liabilities on the accompanying
balance sheets.
(8) EMPLOYEE BENEFIT PLANS
The Company sponsors an employee savings plan (401(k)) for all non-union
employees. Contributions to the plan are in the form of employee salary
deferrals and Company matching funds. Amounts contributed and expensed for
Company matching funds were $352,000 in 1996, $334,000 in 1995 and $227,000 in
1994.
The Company also participates in various multi-employer pension plans. The
plans provide for defined benefits to substantially all of the Company's union
employees. Amounts charged to pension cost and contributed to the plans were
approximately $5,619,000, $5,012,000 and $4,789,000, for 1996, 1995 and 1994,
respectively. At the dates of the latest actuarial valuations, the aggregate
withdrawal liability for the multi-employer pension plans totaled approximately
$2,677,000.
The Company maintains retirement benefit arrangements for certain former key
executives of the Company. The plans primarily provide for payments to these
executives for life with a three-year extension for surviving spouses. The
Company recorded expense of $300,000 in 1995 and no expense in 1996 and 1994.
The amount accrued for these plans was $2,710,000 at June 29, 1996 and
$2,923,000 at July 1, 1995.
During fiscal 1995, the Company established a Supplemental Executive
Retirement Plan (SERP) which will provide retirement benefits to participating
executives supplementing amounts currently limited under the Company's 401(k)
Plan by Internal Revenue Service regulations. These benefits will be made upon
the retirement, death or disability of the executive. Payments are
24
<PAGE> 27
made for the life of the executive with a minimum benefit of 15 years to either
the executive or their beneficiary. The SERP also provides for reduced benefits
in the event of early retirement, death or disability. The Company discounts the
net present value of benefits under the SERP utilizing a 7.50% discount factor.
Vested benefits are not required to be funded; however, the Company has elected
to insure the lives of these executives to assist in the funding of the SERP
liability. The Company recorded $599,000 and $1,284,000 of expense related to
the SERP in fiscal 1996 and 1995, respectively, of which $145,000 and $943,000
in fiscal 1996 and 1995, respectively, represented the vesting of prior service
costs.
(9) CAPITAL STOCK
The Company's Board of Director's unanimously approved on June 9, 1995 the
redemption of the Series A Preferred Stock on July 28, 1995 at $105 per share.
Accordingly, the Series A Preferred Stock is classified in accrued expenses on
July 1, 1995 and no amounts are outstanding at June 29, 1996.
The holders of Class A Common Stock are entitled to one vote per share and
holders of Class B Common Stock are entitled to 10 votes per share, except with
respect to the election of directors, at which time holders of Class A Common
Stock vote as a separate class and are entitled to elect 25% of the total number
of directors and the Class B Common Stockholders elect the remaining directors.
Amounts shown on the balance sheets are net of 1,553,630 shares of Class A
Common stock outstanding that are held by a Riser subsidiary.
The Company has a Stock Incentive Plan which provides for both qualified and
non-qualified stock options, as well as stock appreciation rights and restricted
stock grants for employees, officers and directors of Riser. Under the terms of
the plan, up to 500,000 Class A Common Shares may be the subject of options,
stock appreciation rights or restricted stock grants. Stock options must be
issued at not less than fair value of the Class A Common Stock at the date of
grant and are exercisable for up to ten years from the date of grant.
Options outstanding under this plan are as follows:
<TABLE>
<CAPTION>
Class A Option Price
Common Stock Per Share
- -----------------------------------------------------
<S> <C> <C>
Balance -- July 3, 1993 255,800 $7.31-$10.31
Granted -- --
Forfeited (20,400) $7.31-$10.31
Exercised -- --
------------
Balance -- July 2, 1994 235,400 $7.31-$10.31
Granted 226,500 $ 7.25
Forfeited (13,000) $7.31-$10.31
Exercised --
------------
Balance -- June 1, 1995 448,900 $7.25-$10.31
Granted -- --
Forfeited (1,800) $ 7.31
Exercised (49,500) $7.31-$10.31
------------
Balance -- June 29, 1996 397,600 $7.25-$10.31
------------
Available for future
grants 52,900
------------
</TABLE>
The options granted in 1995 were non-qualified options for federal income tax
purposes and are not exercisable until two years after grant.
At the date of Riser's business combination, options to purchase shares of a
Riser subsidiary's common stock, issued pursuant to that subsidiary's Stock
Option Plan, were converted into options to acquire Class A Common Stock. These
outstanding options, totaling 7,000 at June 29, 1996, are at option prices
ranging from $9.25 to $15.13.
(10) INVESTMENT IN STOP-N-SHOP SUPERMARKETS
The Company has a 70% ownership and 38% voting interest in the Association of
Stop-N-Shop Supermarkets (Association), an association of Cleveland grocery
retailers that provides combined advertising and other services to members. The
Company accounts for this investment using the equity method of accounting.
Amounts paid to the Association for services provided to the Company totaled
approximately $4,131,000, $3,686,000 and $3,429,000 for 1996, 1995 and 1994,
respectively. The trade accounts payable balance in the accompanying balance
sheets include amounts due the Association of approximately $82,000 at June 29,
1996 and $315,000 at July 1, 1995. The trade accounts receiva-
25
<PAGE> 28
Riser Foods, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
ble balance in the accompanying balance sheets include amounts due from the
Association of approximately $1,668,000 at June 29, 1996 and $774,000 at July 1,
1995.
(11) CONTINGENT LIABILITIES
The Company, through one of its subsidiaries, is the guarantor of certain
lease obligations and mortgages of Dominick's Finer Foods, Inc., a former
subsidiary. The lease obligations guaranteed total approximately $11,267,644
over the noncancelable terms of the obligations, some of which extend to the
year 2006. The Company has no collateral or security interests in the lease
obligations or mortgages. The Company is also the guarantor of certain lease
obligations for two of its independently-operated wholesale customers. The lease
obligations guaranteed total approximately $6,785,000 over the noncancellable
terms of the obligations, some of which extend to 2008. The Company has an
indemnification agreement with both of these customers. Management believes that
the contingent liability, if any, resulting from the guarantee of these
obligations will not have a material adverse effect on the Company's
consolidated financial position or results of its operations.
The Company has an agreement with Electronic Data Systems Corporation (EDS)
for the management and operation of the Company's data center. This agreement
provides for minimum payments summarized as follows:
<TABLE>
<CAPTION>
(In thousands)
-------------------------------------
<S> <C>
1997 $3,584
1998 3,750
1999 1,948
------
$9,282
------
</TABLE>
The agreement expires in December, 1998 and may be terminated by either party
upon six months notice and upon the payment of certain fees for termination.
The Company is involved in a number of legal proceedings incidental to its
business. Management believes that the liability, if any, resulting from all
pending legal proceedings will not have a material adverse effect on the
Company's consolidated financial position or the results of its operations.
(12) QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
(In thousands,
except Quarter ended
per share 10/21/95 01/13/96 04/06/96 06/29/96
data) (16 weeks) (12 weeks) (12 weeks) (12 weeks)
------------------------------------------------------
<S> <C> <C> <C> <C>
Net Sales $ 377,387 $ 301,712 $ 305,758 $ 300,352
Gross profit 74,760 58,822 58,085 58,385
Income before
income taxes 5,292 7,742 6,846 7,848
Net income 3,122 4,552 4,055 4,877
Net income per
common share .38 .56 .50 .60
---------- ---------- ---------- ----------
</TABLE>
<TABLE>
<CAPTION>
Quarter ended
10/22/94 01/14/95 04/08/95 07/01/95
(16 weeks) (12 weeks) (12 weeks) (12 weeks)
------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $ 346,701 $ 282,118 $ 275,405 $ 280,769
Gross profit 67,340 55,970 54,841 56,409
Income before
income taxes 3,620 4,591 4,823 6,459
Net income 2,190 2,781 2,903 3,767
Net income per
common share .27 .34 .35 .46
---------- ---------- ---------- ----------
</TABLE>
26
<PAGE> 29
Directors and Executive Officers
BOARD OF DIRECTORS
Anthony C. Rego*
Chairman of the Board and Chief Executive Officer
Charles A. Rini, Sr.*
President and Chief Operating Officer
Ronald W. Ocasek
Senior Vice President -- Administration,
Chief Financial Officer and Treasurer
Thomas A. Rego
Senior Vice President -- Store Development and Secretary
Charles A. Rego
Senior Vice President -- Produce Operations
Anthony Rini
Former Director, Rini Holding Company
Robert H. Kanner#**
President and Chief Executive Officer, Pubco Corporation
Charles A. Rini
President, Rini Realty Company
S. Lee Kohrman#**
Partner, Kohrman Jackson & Krantz
William A. Miller#
Former Chairman, Durkee Famous Foods
Charles A. Rini, Jr.
Vice President, Rini Realty Company
James A. Schlindwein**
Former Vice President and Director, Sysco Corporation
Jack A. Robinson
Chairman and President, JAR Group L.L.C.
EXECUTIVE OFFICERS
Anthony C. Rego
Chairman of the Board and Chief Executive Officer
Charles A. Rini, Sr.
President and Chief Operating Officer
Ronald W. Ocasek
Senior Vice President -- Administration,
Chief Financial Officer and Treasurer
Thomas A. Rego
Senior Vice President -- Store Development and Secretary
Charles A. Rego
Senior Vice President -- Produce Operations
Michael B. Petras
Executive Vice President -- Retail Operations
Frank D. Manetta
Executive Vice President -- Wholesale Operations
Philip S. Arnone
Senior Vice President -- Retail Merchandising
John A. Koscielski
Vice President -- Wholesale Sales
Mark E. Packer
Vice President -- Meat Operations
Richard J. Nye
Vice President -- Eagle Ice Cream
Allen Van Luvender
Vice President -- MIS
Frank A. Zeiher
Vice President -- Human Resources
Leonard V. Meuti
Vice President -- Warehouse and Transportation
Robert M. Catino
Director of Real Estate and Assistant Secretary
Jeffrey P. Sabatine
General Counsel and Assistant Secretary
Phillip W. Oliveri
Director of Finance and Corporate Controller
<TABLE>
<S> <C>
* Member of Executive Committee
# Member of Compensation and Stock Option Committee
** Member of Audit Committee
</TABLE>
27
<PAGE> 30
Stockholder Information
CORPORATE OFFICES
Riser Foods, Inc.
5300 Richmond Road
Bedford Heights, Ohio 44146
(216) 292-7000
STOCK EXCHANGE LISTING
Riser Foods, Inc. Class A Common Stock is listed on the American Stock Exchange
under the symbol RSR.
ANNUAL MEETING
The Annual Meeting of Stockholders will be held on Friday, December 6, 1996, at
the Company's Corporate Offices.
FORM 10-K AVAILABILITY
The Company's annual report to the Securities and Exchange Commission, on Form
10-K, may be obtained by any stockholder, free of charge, upon written request
to the Chief Financial Officer at the Corporate Offices.
TRANSFER AGENT AND REGISTRAR
KeyCorp Shareholder Services, Inc.
127 Public Square, 15th Floor
Cleveland, Ohio 44114
INDEPENDENT AUDITORS
Arthur Andersen LLP
200 Public Square
Suite 1800
Cleveland, Ohio 44114
LEGAL COUNSEL
Kohrman Jackson & Krantz
1375 East Ninth Street
Cleveland, Ohio 44114
INVESTOR RELATIONS INQUIRIES
Questions about Riser Foods should be directed to the Chief Financial Officer at
the Corporate Offices, or by calling (800) 362-8899.
Stock Information
MARKET INFORMATION
The Company's Class A Common Stock is traded on the American Stock Exchange.
There is no established public trading market for the Company's Class B Common
Stock.
Information regarding the quarterly price of the Company's Class A Common
Stock for the fiscal years ended June 29, 1996 and July 1, 1995 is set forth
below:
<TABLE>
<CAPTION>
1996 1995
------------------- ------------------
HIGH LOW High Low
--------------------------------------------------------------------------
<S> <C> <C> <C> <C>
First Quarter $14.50 $ 9.75 $ 7.50 $6.25
Second Quarter $16.38 $13.38 $ 7.38 $6.13
Third Quarter $20.00 $14.13 $ 8.63 $6.88
Fourth Quarter $24.00 $17.75 $10.75 $8.06
</TABLE>
STOCKHOLDERS
As of September 3, 1996, there were 949 stockholders of record of the
Company's Class A Common Stock and 35 stockholders of record of the Company's
Class B Common Stock.
DIVIDENDS
The Company has paid a regular quarterly dividend of $.05 per share on each
outstanding share of its Class A Common Stock and Class B Common Stock since
October 10, 1995, which quarterly dividend has been increased to $.06 per share
with the dividend payable on October 8, 1996 to stockholders of record at the
close of business on September 27, 1996. The declaration and payment of
dividends is subject to the discretion of the Company's Board of Directors, and
there can be no assurance that dividends will be paid in the future. In
determining whether to pay dividends (as well as the amount and timing thereof),
the Board of Directors considers a number of factors, including the Company's
results of operations, financial condition and capital and surplus requirements.
The payment of dividends on the Company's common stock is limited by the
Company's credit facility to $2,828,000 and $3,232,000 during the fiscal years
ending in 1997 and 1998, respectively. The payment of dividends is prohibited if
the Company does not meet certain financial and other covenants contained in the
credit facility.
28
